Definition of Principal and Interest payment (P&I)

periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to amortization of the principal balance; commonly used with amortizing loans.

a periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to amortization of the principal balance. Commonly used with amortizing loans.

Example: A $1,200 annual principal and interest payment is required by a $10,000 face value amortizing mortgage at a 10% interest rate. $1,000 of the first year payment is required for interest; $200 reduces the outstanding balance to $9,800.